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By Ezra Brook
Aug 11, 2011

Carbonite, based in Boston, Massachusetts, had initially planned a $100 million IPO with a pricing range of $15 to $17 – for Aug 9, 2011 – with market capitalization of $384 million at a price range mid-point of $16. However, the company decided to lower its IPO pricing to $10 to $11 yesterday; after the turbulent state of the market. The change will reduce the company’s market capitalization to $240 million, at the low range of $10 a share.

Today, the 11th of August 2011 — two days later than the planned IPO — CARB shares opened at $10.80, then it moved up quickly and stayed up for most of the trading hours, closing at $12.35, which is a gain of 23.5%. Not bad, taking into account the market conditions.

CARB hit a high of $13.40 intra-day and a low of $10.80, which was the opening price. About 1.23 million shares exchanged.

In a conference call with reporters, after the company went public, CARB CEO David Fried, said, “I’m not so concerned about the stock price today. I’m more concerned about what the stock price will be a year or two years from now. The publicity with going public is beneficial for us, but it also gives us a currency for strategic acquisitions.” Friend said that ‘going public is in the best long-term interests of the company, stockholders, and employees’.”

Carbonite is a leading provider on online cloud based backup services. The company has around 1.1 million subscribers scattered across more than 100 countries with over 94% residing in the USA. The company is very popular for the level of automation it brings to backup processes in the cloud. The easy to use GUIs; the security, flexibility and scalability of the service deliver value to customers who are extremely loyal to the company. This is evident by the fact that the customer retention at Carbonite hovers at 96%.

The revenue growth over the last five years (2006-2011) has been very impressive. The first half of 2011 posted earnings show that the company has earned a revenue of $27.2 million. Basic Carbonite services cost $59 per year; $109 for two years and $139 for three years of unlimited storage. Sustainability of this low pricing without capacity restriction has been questioned by many in the industry and skeptic investors in the market, especially after Mozy decided to discontinue its unlimited backup plan back in February 2011. The expectations are that the company will remain unprofitable for the next two to three years as it makes huge investments in marketing and technology and gets ready to exploit future potential of current investments.

The company has around 13 patents applications for technical infrastructure, key usability and design concepts pending.

Investors with around 5% share in stock of Carbonite include Menlo Ventures, Performance Direct Investments, Crosslink Capital and First Plaza Group Trust. For more information on Carbonite’s ownership structure, click on this link.

Carbonite has done a good job in creating online backup and recovery awareness through its advertisements. I believe that the whole industry has benefited from the Carbonite ads. The company revenues have more than doubled every year since 2006. Such growth is very impressive and respectable. Based on the first half 2011 sales of more than 27.2 million, Carbonite is positioned to bring in more than $50 million revenues in 2011, which will be more than double the 2010 revenues. Carbonite continues to spend heavily in advertisements, which might impede the company from becoming profitable sooner.

Carbonite has made an acquisition recently, paying $2 million in cash for Phanfare, which helps the company add new photo sharing features.

Below is Carbonite’s profile as filed at NASDAQ

CARBONITE INC Nasdaq National Market
Company Name : CARBONITE INC
Company Address : 177 HUNTINGTON AVENUE BOSTON, MA 02115
Company Phone : 6175871140
Company Website : www.carbonite.com
CEO : David Friend
Employees (as of 6/30/2011) : 206
State of Inc. : DE
Fiscal Year End : December 31
Status : Filed
Proposed Symbol : CARB
Exchange : Nasdaq National Market
Share Price : $15.00-17.00
Shares Offered : 6,250,000
Offer Amount : $122,187,500
Total Expenses : $2,700,000
Shares Over Alloted : 937,500
Shareholder Shares Offered : 883,527
Shares Outstanding : 24,000,105
CIK : 0001340127

We are a leading provider of online backup solutions for consumers and small and medium sized businesses, or SMBs. We provide easy-to-use, affordable, unlimited, and secure online backup solutions with anytime, anywhere access to files stored on our servers, which we call the Carbonite Personal Cloud. We believe that we are the best known brand in the online backup market.

We founded Carbonite on one simple idea: all computers need to be backed up, and in this always-connected and highly-mobile world, online backup is the ideal approach. Our set and forget automated solution requires little effort and protects our customers stored files even if their computers are lost, stolen, or destroyed.

Our backup solutions work quietly in the background, automatically and continuously uploading encrypted copies of our customers files to the Carbonite Personal Cloud. Our customers can browse and share their photos, videos, and documents anytime, anywhere using a web browser or our free iPad, iPhone, BlackBerry, and Android apps. We charge consumers a $59 flat fee for one year of unlimited online backup. In 2010, we introduced a version of our solution specifically designed for SMBs, with features designed for multiple computers and users, enabling SMBs to easily install and use Carbonite backup without the help of a professional IT staff.

As of June 30, 2011, we had more than 1.1 million consumer and SMB subscribers in over 100 countries. Since 2005, we have backed up over 100 billion files and have restored over seven billion files that might otherwise have been permanently lost. We currently back up more than 200 million files each day.

We have developed a highly predictable subscription revenue model, with a consistently high customer retention rate and a scalable infrastructure to support our growth. We generated revenue of $38.6 million and $27.2 million in 2010 and the six months ended June 30, 2011, respectively. We continue to invest heavily in customer acquisition, principally through advertising, and as a result we recorded net losses of $25.8 million and $10.0 million in the same periods. Our bookings have grown from $14.1 million in 2008 to $54.1 million in 2010.

——–

We were incorporated in Delaware in 2005. Our principal executive offices are located at 177 Huntington Avenue, Boston, Massachusetts, 02115, and our telephone number is (617) 587-1100. Our website address is www.carbonite.com.

IPO Financials

CARBONITE INC Nasdaq National Market
Revenue : $27,242,000
Net Income : $(9,989,000)
Total Assets : $42,370,000
Total Liabilities : $58,036,000
Stockholders’ Equity : $(84,501,000)

IPO Experts

CARBONITE INC Nasdaq National Market
Lead Underwriter : BofA Merrill Lynch
J.P. Morgan Securities LLC
Underwriter(s) : Canaccord Genuity Inc; Oppenheimer and Co., Inc; Pacific Crest Securities Inc; William Blair and Co., L.L.C
Company Counsel : Foley & Lardner LLP
Underwriter Counsel : Davis Polk & Wardwell LLP
Auditor : Ernst & Young LLP
Transfer Agent : American Stock Transfer & Trust Company, LLC

Use of Proceeds

We estimate that the net proceeds to us from the sale of the shares of common stock, based on an assumed initial public offering price of $16.00 per share,the mid-point of the price range set forth on the cover page of this prospectus, will be approximately $77.2 million, or approximately $91.1 million if the underwriters overallotment option is exercised in full, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders.

A $1.00 increase (decrease) in the assumed initial public offering price of $16.00 per share of common stock, which is the midpoint of the range listed on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $5.0 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of one million shares in the number of shares of common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $14.9 million, assuming the assumed initial public offering price remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds to us from this offering primarily for general corporate purposes, including working capital, sales and marketing activities, general and administrative matters, and capital expenditures. We may also use a portion of the net proceeds to acquire, invest in, or obtain rights to complementary technologies, solutions, or businesses. Our management will have broad discretion over the uses of the net proceeds in this offering. Pending these uses, we intend to invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government.

Competition / Competitors

We compete with both online backup providers and providers of traditional hardware-based backup systems. The market for online backup solutions is competitive and rapidly changing. We directly compete with Prosoftnet, CrashPlan, Mozy (a division of VMWare), Norton Online Backup (provided by Symantec), McAfee Online Backup, SOS Online Backup, and others. Certain of our features, including our remote access service, also compete with current or potential services offered by Apple, Google, Microsoft, Amazon, and others. Certain of our planned features, including the ability to share data with third parties, will also compete with current or potential services offered by DropBox, Mozy, SugarSync, and others. With the introduction of new technologies and market entrants, we expect competition to intensify in the future. Many of our actual and potential competitors enjoy competitive advantages over us, such as greater name recognition, longer operating histories, more varied services, and larger marketing budgets, as well as greater financial, technical, and other resources. In addition, many of our competitors have established marketing relationships and access to larger customer bases, and have major distribution agreements with computer manufacturers, internet service providers, and resellers.

We believe that the key competitive factors in the consumer and SMB backup industry include:

– ease of installation and use;

– affordability;

– remote access;

– storage capacity;

– security of customers’ stored files;

– rapid recovery of lost files;

– reliability and redundancy;

– automated file backup; and

– reputation of the provider.

We believe that we compete favorably with respect to each of these factors, by providing easy to use, affordable, unlimited, secure online backup solutions with anytime, anywhere access to stored files.

Some of our competitors have made or may make acquisitions or enter into partnerships or other strategic relationships to offer a more comprehensive service than we do. These combinations may make it more difficult for us to compete effectively, including on the basis of price, sales and marketing programs, technology, or service functionality. We expect these trends to continue as companies attempt to strengthen or maintain their market positions.

SEC Filings
http://www.nasdaq.com/asp/quotes_sec.asp?symbol=CARB&selected=CARB

Disclosure: This is my personal opinion and in no way intended to promote Carbonite. I don’t own any shares of Carbonite. You need to consult your financial advisor before investing in any stock.

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